Report: Competing in the Face of Climate Risks: Evidence from Firms and Policy Priorities in MENAAP

Yesterday's climate risks are today's climate realities, affecting jobs, trade, and livelihoods across the Middle East, North Africa, Afghanistan and Pakistan. Competing in the face of climate risks: evidence from firms and policy priorities in MENAAP is the World Bank's latest knowledge revealing how rising temperatures are reducing firm performance and changing entire industries. Yet, don't sweat quite yet-the report outlines pathways to turn extreme heat into economic opportunities with new sectors of growth such as the projected US$46 billion cooling industry.

The report outlines several climate-responsive reforms can deliver a double dividend: helping firms and economies adapt to heat and other climate stresses while also addressing long-standing barriers to productivity, investment, and competitiveness. It highlights priorities such as improving access to finance, easing business environment bottlenecks, and supporting firms' green competitiveness.

Key Takeaways

Rising temperatures are no longer a future risk for MENAAP firms; they are already affecting sales, productivity, wages, and operating conditions. At the same time, climate-related trade measures are reshaping export competitiveness, especially in carbon-intensive sectors. The report's core message is practical: with 3. the right reforms, countries can reduce climate-related losses, support private sector adaptation, strengthen market access, and unlock new opportunities in areas such as sustainable cooling, renewable energy, and greener production.

Chapters

1. Executive Summary: A high-level overview of the region's climate exposure, the effect of heat on firms, and the implications of climate-related trade measures.

2. The Impact of Temperature Changes on MENAAP's Firms and Adaptation Policies: Examines how extreme heat affects firm performance and why smaller and more financially constrained firms face greater losses.

3. Impacts of European Climate Mitigation Policies on MENAAP's Trade and Foreign Direct Investment: Assesses how policies such as the EU CBAM and UK CBAM may affect exports, investment patterns, and sector competitiveness.

4. Building Resilience and Seizing Economic Opportunities: Sets out reforms to strengthen adaptation, improve competitiveness, and help firms capture opportunities in a greener global economy.